Subscribe to Journal

Wednesday, January 23rd 2013

12:49 PM

The Wealthy Need to Pay a Wealth Tax

QE causes asset values for commodities to rise. This is the benefit of QE, not for the man on the street. QE in the beginning did help stocks and caused a mild upturn in the job picture. But the cost of living rises while wages in a global society don't. The wage increases that these Nominal GDP guys like Scott Sumner wants, in order to counteract the increase in commodity prices, like oil and food, will not be passed onto workers in a global society.

Ultimately this will hurt the American consumer, and it will benefit only the rich. Therefore, if the Fed does this there needs to be a wealth tax in order to offset the extra wealth flowing to the rich through too much QE.

Wednesday, January 23rd 2013

12:37 PM

Warning Middle Class, the Fed Wants A New Housing Bubble with the New MBS QE

Watch out Mainstreet. The Fed Is Out to Get You!

The Fed announced on 9/13/2012 that it wants another housing bubble. Well, actually, the Fed announced that it would purchase unlimited Mortgage Backed Securities.

Mortgage Backed Securities, or MBS, allow irresponsible banks to offer easy money loans and pawn them off to unsuspecting investors. In this case, the pawn receiver is the Fed, who will be the buyer of all these securities.

Now, one presumes that the Fed is trying to jump start the business of securitization. They will buy 1/2 of the securitized bonds. Once the Fed is up to its eyeballs in these bonds, will the private sector jump in as the Fed pulls back? That is the question. And if the private sector jumps in, will there be government guarantees, as the Fed and the TBTF banks and the IMF want?

Securitization of long duration mortgages gives the TBTF banks, their shadow banks and the hedge funds the opportunity to get rid of questionable mortgages, and receive money to make more questionable mortgages. I have predicted that the Republicans really want the repeal of Dodd-Frank and the Volcker Rule in order to speed up the securitization project.

Now that the Fed is involved, look for every effort to be made to weaken the rules in Dodd-Frank to accomodate easy money lending.

The only question that remains is if Americans remember and if they won't play the game. The Fed wants to throw an easy money party. Are we all going to attend and how much of this toxic punch will we be drinking?

As regular QE punishes savers with low interest rates, MBS securitization will punish renters, as house prices will appreciate with no real basis in fundamental valuation, that is, based upon wages and rents. House prices should be based upon rents, not the other way around.

The question remains for me, who will be the shadow banks? Where will the next Ameriquest and Countrywide come from?

People must be warned that this is an attack on the middle class, like they can afford it.

Bernanke is proving that the banks are in a lot worse shape than we previously thought. This new QE is no guarantee that they will get better. Multi generational living and the new love of IPads instead of cars and the new frugality could stand in the way of this silly scheme.

Bottom line, it has been less than 10 years and the central bank wants another housing bubble. Housing should be based upon wages and rent, not upon a scheme to attack the middle class, leaving them with houses that are grossly overvalued when the crash comes.

The Fed has big shoulders, able to tolerate totally useless loans that will never be paid back. This is because the Fed does not have to have a market for these securities. The Fed can just hold onto them forever. Some will fail, some will be paid down.

It won't matter to the Fed, who is putting the US government on the hook for all these mortgages. The Fed doesn't do this for free. Once this bubble gets going, you may want to sell your house as prices appreciate, and certainly do not borrow against it, because the Fed will pull the plug on this little buying spree at some point. Then you won't be able to give away your house.

Saturday, January 19th 2013

8:11 AM

So What Is a Rational Solution to a Real Government Debt Crisis?

No one argues with the Tea Party that a governmental debt crisis exists. However, sane and prudent slowing growth of the budget is quite different than the slash and burn austerity mentality that the Tea Party shares with the IMF. I have written about the danger of IMF thinking, and in nations where cuts to government spending are massive, in the face of high unemployment, this becomes a dangerous way to go. There has to be balance and a gradual weaning of the pace of growth of government, not a wholesale slaughter of major programs. Unemployment could rise dramatically if governmental programs are slashed.That is true of many areas of Europe.

Regardless of what Rick Santelli has said, we have been screwed by the big banks and the central banks of the western world. The question is are we going to peacefully resist this new financial order or are we going to let these bankers take down our way of life. Are we going to prove Karl Marx right by hurting the average Joe or are we going to strengthen mainstreet by rational thinking? As we see wages go down in a world economy, are we going to pump housing up or are we going to let it correct so that renters can actually afford to rent on the lower wages? At some point, the deleveraging and globalization that is taking place will produce manufacturing and results. But as of now the opposite is happening.

Sunday, January 13th 2013

1:39 AM

Dividing Small Business from Government Is a Wall Street Scam

The effort to drive a wedge between small business and government is a Wall Street scam. Truth is, small business has no access to world capital markets, forcing small business to rely on credit from banks that are based upon deposits. That is what made it so evil that Jamie Dimon and JP Morgan Chase Bank was gambling with deposits in the UK financial casino that should have been loaned to small business. While small business does not have access to capital markets, government has no access to central bank low interest loans like Wall Street does. This is all a concerted plan to leave small business and local government as the ones most hurt by the financial shenanigans of Wall Street. Dividing small government from small business gives small business owners the mistaken notion that they are being helped by Wall Street, that Wall Street is on their side. But many know better. I emailed President Obama on this issue awhile back: Mr President, small business does not have access to capital markets. Small government does not have access to Bernanke's low interest loans that would help them escape the derivatives bets that they lost. You have done nothing about these. You are really not much of a Democrat, as you really are on the side of Big Business. That is why we don't have jobs. Romney is no different, but you haven't helped enough. What Republicans are so dishonest about regarding small business is that they make it a tax issue, when it really is an access to capital markets issue. The truth of the matter is this: If small business had access to worldwide capital markets like big business does, there would be less of a need for predatory businesses like Bain Capital. Bain Capital, run by Mitt Romney, borrows money and forces the companies it takes over, to pay the money back. Sometimes the interest rates are not so good. Sometimes the companies become over weighted by debt while the Bain investors cash out, leaving some companies only solution to be bankruptcy. Bain is like a plague upon businesses that may be able to borrow on the capital markets but, because they are private small businesses, cannot have access to these markets. The Republicans Want to Break America so They Can Cut Social Programs The Republicans have a plan. They want to get people to not buy our treasury bonds so that American government will have to be cut and the poor and elderly taken off any help they get. This is unnecessary and wrong. There is no financial reason to put the US in such debt. The Republicans, with their supply side economics, is the party of debt, not the Democrats!

Sunday, January 13th 2013

1:37 AM

Calpers Has a History of Social Activism With Money. Turn That On Wall Street

Calpers has sold assets from Asia, for bad behavior. And this power comes from Calpers being the largest pension fund in the world. Calpers could turn this activism against Wall Street. I suggest that is exactly what the 151 billion dollar fund should do. The fund could threaten to crash Wall Street, and then get the Street to quit messing with California governments. Indeed, capital markets are closed off to small business as the discount window is closed off to local governments, and that makes these entities the ones that suffer the most when there is an economic downturn. Yet these are the entities that most closely relate to main street and the plight of the middle class.

Sunday, January 13th 2013

1:32 AM

The Campaign to Discredit California and Pensions Comes from Evil Wall Street

Wake Up America to the Wall Street Scam Against California There is no question that there have been abuses of pension systems, mainly through the use of rosy scenarios as to future earnings through pension investments. However, there is an even greater scam perpetuated by Wall Street and the desire of this evil force of crony capitalist greed to limit the rights of pension holders in California. But regardless of what the Wall Street firms want, it is part of California law that pension funds get top priority in any bankruptcy proceeding. It is the LAW. Public Pensions cannot be touched. That is the point. The pension funds then become first creditors in line if obligations to them are outstanding. However, there has been a serious attack on California's "mismanagement" and on California's pension system and it has come from Wall Street. Wall Street wants to be first creditor in line, or limit the claims of Calpers in bankruptcy court.

In the case of San Bernardino and Stockton, Calpers has refused to cooperate with the bondholders. The bondholders knew the law. They are trying to get unscrupulous judges to water down and tamper with the law. Whatever you think of public pensions, be advised that Wall Street wants to come first. And it is not just with pensions. Did you know that if you have money in bank of America, the Fed has placed toxic derivatives totaling over 60 trillion dollars as first in line for FDIC insurance if Bank of America fails? Don't think this is just about public pensions screwing the public. It is about Wall Street screwing the rest of us. In fact, Wall Street wants a piece of your government in the form of payments. Some of these are quite hurtful, including failed bets on Derivatives. I wrote about those issues here. This has become a battle of Wall Street versus main street. Any effort to get you to see otherwise is because Wall Street is paying main street media (msm) to get you to be on its side. Wake up America.

Mr Obama In Case You Didn't Get My Email: Here It Is!

You need to defend Dodd-Frank with your last breath. If Dodd-Frank goes down, America is under attack by the ponzi, toxic lenders, and shadow banksters while Jamie the turd Dimon claims he doesn't want easy money.